News reports say the estate of Lord of the Rings creator J.R.R. Tolkien is suing New Line Cinema, claiming the company failed to pay a cut of gross profits for the movies based on Tolkien's books. The news comes just as the future of New Line is in real turmoil at Time Warner. The Tolkien Trust and original Lord of the Rings publisher HarperCollins (owned by News Corp which runs rival Fox Studios) filed the lawsuit against New Line today in Los Angeles Superior Court. It claims New Line was required to pay 7.5% of gross receipts from the films to Tolkien's estate and the other plaintiffs. The lawsuit estimates the films have reaped nearly $6 billion combined. New Line already is paying a legal settlement to Lord Of The Rings trilogy director Peter Jackson who is still auditing the company about his profit participation. The lawsuit is being brought by Bonnie Eskenazi of Greenberg Glusker. Here's the news release:

(Los Angeles, CA - Monday February 11, 2008) --The trustees of The Tolkien Trust, a British charity, have filed an action against New Line Cinema for its failure to pay a contractually required gross profit participation in the three films based on the world-famous Lord of the Rings trilogy. The trustees of the estate of JRR Tolkien and HarperCollins Publishers are co-plaintiffs in the lawsuit. The suit was filed today in Los Angeles Superior Court.

The Lord of the Rings films produced by New Line are among the most financially successful films ever created by Hollywood and were released in 2001, 2002 and 2003 respectively. The cumulative worldwide gross receipts to date total nearly $6 billion. Notwithstanding the overwhelming financial success of the films, and the fact that the plaintiffs have a gross participation in each of the films, New Line has failed to pay the plaintiffs any portion of the gross profit participation at all.

The trustees’ UK lawyer, Steven Maier, of Manches LLP, said: “The Tolkien trustees do not file lawsuits lightly, and have tried unsuccessfully to resolve their claims out of court. But in this case, New Line has left them no option at all. New Line has not paid the plaintiffs even one penny of its contractual share of gross receipts despite the billions of dollars of gross revenue generated by these wildly successful motion pictures. To make matters worse, to date New Line has even prevented the plaintiffs from auditing the last two films of the series. The trustees are very aggrieved by New Line’s arrogance.”

The complaint seeks, among other things, in excess of $150 million in compensatory damages, as well as punitive damages, and a declaration from the Court that the plaintiffs have a right to terminate any further rights New Line may have to the Tolkien works under the agreements, including The Hobbit, due to the serious and material nature of the breach of the agreements.

Bonnie Eskenazi, the trustees’ US counsel who filed the complaint, said, “New Line has brought new meaning to the phrase ‘creative accounting.’ I cannot imagine how on earth New Line will argue to a jury that these films could gross literally billions of dollars, and yet the creator’s heirs, who are entitled to a share of gross receipts, don’t get a penny.”

JRR Tolkien is the world-renowned author of the “Lord of the Rings” trilogy and “The Hobbit.” The Tolkien Trust is a UK registered charity that has made grants to charitable causes all over the world totaling over $8 million in the last five years alone.

New Line Cinema has reached the end of the line. Time Warner announced Thursday that it will merge the studio into Warner Bros. and lay off hundreds of employees, including Co-Chairmen and -CEOs Bob Shaye and Michael Lynne. The company's plans were originally reported last month by L.A. Weekly columnist Nikki Finke but were strenuously denied at the time by a New Line spokeswoman. Time Warner CEO Jeff Bewkes indicated that the New Line banner will continue to exist but that it will no longer greenlight, market or distribute its films. "Between the cost savings and the revenue enhancements, we believe we can at least double the earnings of New Line," Bewkes told the Los Angeles Times. In an email to New Line staffers, Shaye called his departure "painful" but added that he was proud to have been a part of creating "some of the most popular and successful movies of all time." He said that he and Lynne "intend to remain actively involved in the industry in an entrepreneurial capacity" but otherwise gave no hint of their future plans.

At least 75 percent of New Line's staff of 600 are likely to be fired in the coming months despite assurances by Time Warner chief Jeff Bewkes on Friday that he wants to retain as many New Line employees as possible, Daily Variety reported today (Monday), citing an "emerging consensus." The trade publication said that New Line is also expected to shut down its offices in New York and its headquarters in West Hollywood, moving remaining operations to the Warner Bros. lot in Burbank. Speaking to New Line employees by satellite on Friday, Bewkes said that Co-Chairmen Bob Shaye and Michael Lynn are "still here," but "for everyone's sake, they need to step back from the process."

Kristin Thompson has a wonderful new article up outlining the success of ‘The Golden Compass’ overseas, and more relevant to Tolkien fans, news about the New Line Logo appearing before the ‘Hobbit’ project:This tends to confirm what previous coverage has hinted: that New Line will be allowed to make The Hobbit itself (in a co-production with MGM) rather than turning the project over to Warner Bros. This, coupled with Anne Thompson’s recent remarks that Mark Ordesky will likely supervise The Hobbit and its untitled companion film, suggests that fans may have less to worry about than they thought. Time Warner and Warner Bros. may recognize that it’s best not to tamper with success. Keeping the circumstances for this new project as close to those of the LOTR trilogy as possible offers the best chance for lightning to strike twice.

Read the full article at Kristin’s website, and don’t forget to order your copy of ‘The Frodo Franchise!’ [Read More]